Businesses need certainty about auto-enrolment pension scheme, warns Cowen

Fianna Fáil TD Barry Cowen said businesses need to know what costs can be expected.

Businesses need certainty about the costs involved in the Government’s auto-enrolment pension scheme, Fianna Fáil TD Barry Cowen has said.

At the launch of a report examining the Commission on Taxation and Welfare report, Independent TD Seán Canney also said the Government needs to make clear the treatment of people in terms of tax when they retire under the new scheme.

It comes after Social Protection Minister Heather Humphreys told reporters at the Fine Gael think-in that the auto-enrolment scheme will be up and running next year.

She said she plans to bring forward the legislation to underpin the “transformative” scheme this quarter.

Mr Cowen said businesses need to see in front of them what costs can be expected.

He said the scheme “won’t be easy” but it was committed to in the Programme for Government.

The plan is that employees will contribute to the pension pot, with their contributions set to be matched by their employer as a percentage of the employee’s gross income.

This contribution will then be topped up by the State.

Mr Cowen and Mr Canney were speaking as members of the Oireachtas budget oversight committee after making 40 recommendations after examining the Commission on taxation and welfare report.

There are concerns that a tax disparity will exist between those currently making pension contributions and those who will be contributing under the auto-enrolment pension.

“The committee recommends that prior to the auto-enrolment scheme coming into effect, that efforts be made to address this inequity. The committee notes this would be in line with the Commission’s recommendation that anomalies in the tax treatment of different retirement arrangements should be eliminated as far as possible,” the report states.

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Among the recommendations, the committee agrees with proposals to broaden the tax base, a review of VAT treatment of goods and services, and the temporary reduction of VAT rates should be limited.

The committee outlines that any plans to tax pensioners must ensure elderly people are “not adversely affected” by changes.

The committee has said it has “concerns” that the Commission’s analysis of a proposed universal basic income was based on “an insufficient number of studies” and recommends that further examination of the proposal be undertaken.

TDs also have called for a “thorough review” of a recommendation by the commission of a “site value” tax to replace or run parallel to local property taxes. The commission said this measure would raise money for the State and could reduce the cost of housing.

However, the budget oversight committee has said further research is required on such a measure and “complete, adequate and appropriate data regarding land values and land holdings be gathered in advance”.